Timbuktu, an educational and entertainment-focused iPad app for kids has relaunched with a revamped design, additional content, and daily updates. Previously, the company, a recent 500 Startups grad, had been testing a more traditional magazine-style experience with a cover, index and pages, but decided to move to the updated design based on user testing and feedback.

The company was founded by Elena Favilli (CEO) and Francesca Cavallo (Creative Director), who relocated from Italy to San Francisco in January of this year. Although neither founder has children of their own, they were inspired to work in the children’s app space because of Favilli’s background in journalism and children’s publishing, and Cavallo’s background in education and theater. Timbuktu is designed to sit in the middle of these interests, combining education, design, and technology into one playable experience on the iPad.

Originally, the company had built a magazine for parents and children to enjoy, but soon found that mimicking an old-fashioned paper magazine on the iPad didn’t quite work. “It was a very traditional structure,” Favilli says of Timbuktu’s first version, out in February. “It’s something that makes sense for us because we grew up with that. But working with children, we realized that it didn’t make any sense for them to start with a cover, or to flip the pages, so we developed this new version.” The new design won a “Best Design” award at the LAUNCH Education and Kids 2012 event in Mountain View, when it was previewed earlier this year.

Though the design is admittedly adorable, but there are some concerns with Timbuktu’s business model. Today, the app features daily activities meant to maximize the 30 minutes or so of “play time” busy parents have with their kids at the end of a day. Unlike other kids’ apps meant to serve as “iPad babysitters” while parents work on other things, Timbuktu is to be used with parent and child together. Every day, you can unlock a new activity, which range from educational (but still fun) stories, printable activities, recipes parent and child can make together, and more. There are also themed activities for holidays, like a planning kit for a Halloween party, for example. As children complete the activities, they can earn badges for their profile, like “math athlete” or a chef’s badge.

The design and activities make Timbuktu a pleasure, but the way you pay for content is not ideal. Timbuktu tries pulling parents in with new content daily, but some parents will be unhappy to find that on some days, that content isn’t free. “Most of the stories are free right now, but you have to pay for premium stories,” says Favilli. “We’re using a virtual currency called bubbles, and you have to pop the bubbles to unlock a premium story,” she explains. These stories are unlocked via in-app purchases, and although Favilli says the app is targeted toward parents to use with their grade school-aged child, the bubble-popping design seems like something a kid could get into trouble with, if left alone with the app for a minute. “Some days, this content is free, other days it’s premium,” she adds, noting that you can always go back and access older content if you don’t want to pay.

Generally speaking, I’m not a fan of kids apps using in-app purchases to monetize. Although parental controls offer some protection, just having the pay-to-play option so prominently featured within an application mars the experience. That’s why I abhor Talking Tom, for instance, but happily subscribe to the bedtime story collection from Fafaria. There’s some good news, though – Favilli says a subscription-based alternative is in the works. That would be a far better way to pay, since Timbuktu is really is just a modern spin on magazines.

Also in the works: a $1 million seed round led by 500 Startups, including participation from Kailua Venture, H-Farm, Mind the Seed, Atlante Seed, and angels Rohit Sharma, Elliot Loh, and Craig Mod (so far). The round will be closed in a few weeks’ time.

Currently a team of six, four in San Francisco and two in Milan, most of Timbuktu’s content is built in-house, but the update introduces some which comes from McSweeney’s, a San Francisco-based publisher. The company plans to open up the app to further to other partners in the future, as well.